Is the new Falklands oil boom proving a bit of a damp squib? After Falkland Oil & Gasrecently announced that its Toroa exploration well would be plugged and abandoned comes another disappointment.

Shares in Rockhopper Exploration have dropped 15.25p to 289.5p as the company said a well on the Ernest prospect had come up dry. This contrasts with the excitement in May when its Sea Lion prospect was declared an oil discovery, with estimates of up to 242m recoverable barrels. Analyst Richard Rose at Oriel Securities remained positive, saying:

Our buy recommendation remains unchanged. Ernest was always seen as high risk and the investment case in Rockhopper remains focussed on Sea Lion and the prospectivity elsewhere on the eastern margin of the basin.

Meanwhile Falkland Oil & Gas has fallen 9.75p to 113.25p after it reported losses of $2.16m for the six months to June. Its cash balance has fallen from $93.5m to $80.4m, and after abandoning Toroa it is now seeking a suitable rig to drill in the deeper water areas of its licence. But it said there was considerable competition for suitable rigs, which could extend the drilling programme into 2011.

Desire Petroleum, which has prospects close to Ernest, has also fallen back, sligin 6.5p to 94.5p. But Alan Sinclair at Seymour Pierce said:

Rockhopper has reported that well 26/6-1 on the Ernest prospect in the southern part of the North Falklands Basin is a dry hole. Ernest is located adjacent to the east of a number Desire's mapped prospects. Whilst some of these prospects currently rank amongst the biggest in the Desire portfolio, they typically carry very low chance of success factors - in some cases single-digit percentages. Whilst the Ernest result is a setback in terms of de-risking the Desire prospects in the area, we remain of the view that, with a multiple well programme only just getting underway, Desire remains a buy.

The recent spate of drilling in the Falklands has proved controversial, sparking protests from Argentina which still claims the territory.